On 4 July 2019, the French Anti-Corruption Agency’s (the AFA) Enforcement Committee (the Enforcement Committee) issued its first and much-awaited decision since its creation by the so-called “Sapin II” Law in France (the Decision).
The Enforcement Committee found that none of the alleged five breaches of the anti-corruption requirements set out in Article 17 of the Sapin II Law (Article 17) were established, such that there were no grounds for sanctioning either the company (a French electrical distribution company) or its director referred before it.
The Decision includes relevant guidance for companies, groups and their top-level managers falling under the scope of Article 17 and the related duty to detect and prevent corrupt practices through a robust ABC program and dedicated systems and controls.
- The legality of the inspection
The legal person referred before the Enforcement Committee (the Entity) had challenged the conditions in which the AFA’s inspectors had run their inspection, in particular by questioning their ability to request documents and information related to a period of time preceding the enactment of Article 17, and allegedly falling out the scope of the AFA’s legal remit, for instance dealing with competition or tax evasion issues.
The Entity also criticized the fact that none of the interviews of its staff and senior managers conducted by the AFA’s inspectors throughout their investigation had been formalised in a transcript. It argued that as a result, the AFA could not rely on these declarations to bring administrative charges against the Entity.
In response, the Enforcement Committee held, principally, that:
- It has no jurisdiction to rule on the potential refusal by the Entity to provide documents or information requested by the AFA, which may constitute a criminal offence and should therefore be dealt with by criminal courts (juge de l’entrave).
- Documents and information may be collected by the AFA during the inspection in relation to a period preceding the entry into force of Article 17 (i.e. before 1st June 2017), insofar as such documents and information are deemed “useful”, e.g. because they show how the company faced up to risks of corruption and influence peddling in the past. In this respect, one should bear in mind the fact that the AFA has a duty to inform the public prosecutor of any facts of which it becomes aware during the exercise of its duties which may constitute an offence, and that the statute of limitations for criminal offences go back many years.
- It allows for the declarations made by both individuals within the company and third parties during the inspection but not formalised in interview transcripts to be relied upon by the AFA, failing any legal or regulatory provision requiring such interview transcripts. The said declarations would not, therefore, have been re-read and challenged where necessary by the individuals or third parties in question.
- The scope of enforcement and the impact of remediation
The Decision specifically notes that the breaches which may give rise to sanctions from the Enforcement Committee are the ones evidenced by “a situation ascertained from the entry into force of the [Sapin II] law of 9 December 2016, which persists on the day the Enforcement Committee is due to rule”.
Such a scope of enforcement, which would seem to be limited to the breaches which remain on-going at the date of the Enforcement Committee’s hearing, will at the least surprise contentious regulatory practitioners. In particular, after reading the Decision, one could wonder how the scope of the accusation brought against legal and natural persons may be established by the Head of the AFA prior to the hearing, when notifying the alleged breaches of Article 17.
In addition, although Article 17 entered into force on 1st June 2017, the Enforcement Committee has explicitly taken into consideration the improvements made by the Entity to its anti-corruption framework since the inspection which led to the disciplinary proceedings, before determining whether each alleged breach was established or not.
Such an approach could seem somewhat lenient compared to the position adopted by enforcement committees of other French regulators, such as in the financial and banking fields. How many times have the French banking and markets regulators’ enforcement committees affirmed that any corrective or remediation measures taken after the breach are “without consequence” on the characterisation of such breach and may only be taken into account when deciding on the quantum of the sanction to be imposed?
- The impact of the soft law published by the AFA
Moreover, the Enforcement Committee gives companies falling under the scope of Article 17 the opportunity not to follow the recommendations issued by the AFA, provided that they are able to show the relevance, quality and effectiveness of their anti-corruption framework and to justify the validity of the methods which they have freely chosen to follow.
As highlighted in a previous Article dedicated to the soft law of the AFA, more and more recommendations are being published by the AFA, some of which go beyond the requirements of Article 17 itself. While the Enforcement Committee states that actually following the recommendations could be regarded as sufficient evidence of compliance with Article 17, it leaves the door open to companies to depart from them where necessary.
- The reward of the compliance program and efforts
Finally, it seems clear from reading the Decision that the Entity has implemented a significant anti-corruption framework and made numerous improvements over the past year and a half. In particular, it had implemented:
- A risk mapping containing various risk scenarios and levels of risk, which had been provided to management and had led to various action plans in order to reduce the Entity’s exposure to risks of corruption and influence peddling;
- A code of conduct, which had been diffused to its subsidiaries in 44 countries and translated into 19 languages, setting out the behaviour expected of its employees in the field of anti-corruption;
- Procedures and tools for its main clients and suppliers at risk, rules governing its relationships with intermediaries as well as a rule book to be followed in the event of M&A;
- Accounting control procedures including the specific risks of corruption identified in its risk mapping;
- Second-level controls including specific control points on the anti-corruption framework since 2018. Following a criticism by the Head of the AFA, the internal audit department’s reporting line was modified so that it reported directly to management in order to “reinforce its independence”.
In light of the above, this first Decision should not be seen to represent any willingness to weaken anti-corruption enforcement in France and beyond. It is a reasoned ruling which takes into account the specific circumstances of the case and gives credit to the Entity’s reaction following the inspection.
The White Collar Crime and Regulatory Enforcement team at Allen & Overy Paris will be closely monitoring any developments regarding the AFA and French anti-corruption legislative framework and looks forward, as always, to assisting you in this field.
Avocat à la Cour, Counsel
Allen & Overy, White Collar Crime and Regulatory Enforcement
Avocat à la Cour, Associate
Allen & Overy, White Collar Crime and Regulatory Enforcement